Tesco pays price for ‘axing’ Clubcard

Tesco has been accused of abandoning its Clubcard scheme – believed by most to be one of the main drivers of its global expansion – in favour of a price war which has seen it report its worst Christmas sales for a decade.
Shares in the supermarket giant, the world’s third-biggest retailer, were down 12% to a 32-month low at 339.5p by 8:30 this morning (Thursday), wiping £3.7bn off its value.
Chief executive Phil Clarke has pledged to fight back with millions of pounds of investment in price cuts and expanding online, although he conceded that some of Tesco’s weak performance was due to its “Big Price Drop” campaign in September.
Clark said the promotion, paid for by slashing Clubcard rewards, had attracted extra customers, but had not yet tempted enough to offset the drop in takings.
But some analysts and insiders question the strategy, claiming that, by effectively abandoning Clubcard, the retailer is potentially alienating its customer base.
One observer said: “Tesco appeared to be trying to attract new customers by scrapping double points on Clubcard to pay for the Big Price Drop but this is really saying to existing customers, ‘you’re not worth it anymore’. The good feeling generated by double points has evaporated.”
LLPR director Nigel Lawrence, who worked at DunnHumby in the early 2000s, said: “Clubcard-driven marketing appears to be taking second place to ‘old fashioned’ price cuts. The card should be allowing the retailer to raise its game, shouldn’t it?”
And another insider added: “Tesco has lost sight of the one thing which it has got over its rivals – detailed insight into its customers and what they buy. By entering a price war it is trying to beat the likes of Asda at their own game, and there will only ever be one winner in that battle.”
Tesco, which lags only French group Carrefour and US industry leader Wal-Mart by annual sales, said it expected minimal trading profit growth in the year to February 2013, compared with a market forecast for a 10% rise.

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